Item
5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
On April 24, 2009, Terry A. Stalk
resigned as Executive Vice President and Chief Financial Officer of Pacific
Coast National Bancorp (the “Company”) and its subsidiary, Pacific Coast
National Bank (the “Bank”).
Item 8.01 Other
Events
On April 29, 2009, the Bank retained
Bob R. Adkins as a consultant to assist the Company and the Bank with certain
aspects of the chief financial officer function on an interim
basis. Mr. Adkins has previously worked as an executive officer for a
number of other financial institutions and has more than 30 years of experience
in the financial institutions industry.
As
previously disclosed in the Form 12b-25 filed by the Company with the Securities
and Exchange Commission on March 31, 2009, as a result of subsequent events
related to the deterioration in loan quality as of December 31, 2008, the
Company has been in the process of analyzing its allowance for loan losses in
order to determine the amount of provision for loan losses required for the
fourth quarter of 2008. This analysis, a recent regulatory
examination of the Bank by the Office of the Comptroller of the Currency (the
“OCC”) and the recent resignation of the Chief Financial Officer have prevented
the Company from finalizing its consolidated financial statements for the year
ended December 31, 2008.
The
Company has completed its analysis of its allowance for loan losses in
conjunction with the completion of the recent OCC examination. As a
result of this analysis, the Company recorded a provision for loan losses for
the year ended December 31, 2008 and three months ended March 31, 2009 of $7.1
million and $1.7 million respectively, resulting in estimated net losses of $8.0
million and $2.2 million for the same periods, respectively. The
Bank’s ratio of total capital to risk weighted assets was 6.84% as of March 31,
2009, which caused the Bank to be deemed “undercapitalized” as of March 31, 2009
under regulatory capital guidelines. The Bank’s ratios of Tier 1 capital to
risk-weighted assets and Tier 1 capital to average assets were 5.55% and 5.23%
as of March 31, 2009. In order to be “adequately capitalized” under
regulatory capital guidelines, an institution’s ratios of total capital to
risk-weighted assets, Tier 1 capital to risk-weighted assets and Tier 1 capital
to average assets must be at least 8.0%, 4.0% and 4.0%,
respectively.
Because
of the Bank’s regulatory capital status and the other developments described
below, the Company has been in extensive discussions with several parties
regarding the possibility of a substantial equity investment in the Company,
which could also entail a rights offering to existing shareholders, or a
possible sale of the Company.
Also
subsequent to December 31, 2008, the Bank was notified by the OCC that it has
imposed a number of requirements and restrictions on the Bank’s operations,
primarily due to the Bank’s reduced capital levels, deteriorating asset quality
and net losses. These requirements and restrictions: (i) require the
Bank to notify the OCC in advance prior to adding or replacing a director or
senior executive officer; (ii) generally prohibit the Bank or the Company from
making severance or indemnification payments without complying with certain
restrictions, including obtaining prior regulatory approval for such payments;
(iii) prohibit the Bank from increasing its loans above the amount it had on its
balance sheet as of December 31, 2008 until it has adopted and implemented
satisfactory credit and concentration risk management processes; (iv) prohibit
the
Bank from
accepting, renewing or rolling over brokered deposits and restrict the effective
yield it can offer on deposits; (v) require the Bank to submit a capital
restoration plan to the OCC; (vi) prohibit the Bank from allowing its average
total assets during any calendar quarter to exceed its average total assets
during the preceding calendar quarter unless (A) the OCC has accepted the Bank’s
capital restoration plan, (B) the increase in the Bank’s assets is consistent
with the plan, and (C) the Bank’s ratio of tangible equity to assets increases
during the calendar quarter at a rate sufficient to enable the Bank to become
adequately capitalized within a reasonable time; (vii) prohibit the Bank from
acquiring or establishing a financial subsidiary and preclude the Bank from
expedited treatment on certain regulatory applications and require it to file
regulatory applications in advance for certain activities instead of
after-the-fact notices; and (viii) will increase the Bank’s semi-annual
assessment payable to the OCC. The Bank may also be subject to higher
deposit insurance premiums. The OCC also has proposed that the Bank
achieve and maintain regulatory capital ratios in excess of the regulatory
minimums. Specifically, the Bank must develop a plan, subject to the
OCC’s review and non-objection, to achieve ratios of Tier 1 capital to adjusted
total assets of 9.0% and total risk-based capital to risk-weighted assets of
11.0% by June 30, 2009, and ratios of Tier 1 capital to adjusted total assets of
9.0% and total risk-based capital to risk-weighted assets of 12.0% by September
30, 2009. In addition, the Company was notified by the Federal
Reserve Bank of San Francisco that the Company may not declare or pay any
dividends or make any extraordinary payments to any entity or related party
without prior approval of the Federal Reserve Bank of San
Francisco.
Forward-Looking
Statements
